Full plate and election on the horizon for Legislature

Posted: Wednesday, January 02, 2002

JUNEAU (AP) -- When the Legislature returns Jan. 14, lawmakers will contend with a looming $1.1 billion deficit and a lame-duck governor who has asked for an increase in state spending.

A group of largely junior lawmakers have talked about reinstituting an income tax, capping permanent fund dividend checks and imposing other taxes.

But the deficit won't materialize until next year, in time for the 23rd session of the Legislature. A new redistricting plan could also require all but three seats in the 60-member Legislature to be up for election in November when voters elect a new governor.

Budget deficit? Elections? Redistricting?

''It's the perfect storm in Alaska politics,'' said House Minority Leader Ethan Berkowitz, D-Anchorage. ''It's a time when all these loads are converging at once.''

A lawsuit challenging the state's new political boundaries is slated for trial in Anchorage Superior Court the week before lawmakers converge in Juneau.

Republican members of the Legislature oppose the map because it would pit as many as 20 GOP incumbents against each other in the November election.

The Legislature was dismissed from the lawsuit, but several key Republicans remain, including state House Speaker Brian Porter, R-Anchorage, Senate President Rick Halford, R-Chugiak, and state Republican Party Chairman Randy Ruedrich.

The trial is expected to last two weeks. Alaska's fiscal problems are expected to last much longer.

The state Department of Revenue estimated the state budget will be $906.3 million short this fiscal year and will end next year with a $1.1 billion shortfall.

Alaska state government has historically spent more than it derives in revenues and had made up any shortfall by using funds from the state's Constitutional Budget Reserve.

The fund -- which has provided more than $4 billion for state government -- has been replenished by excess oil royalties and court settlements.

But all the large court settlements are finished and revenue officials expect oil to remain at about $18 per barrel for the next two years. At that rate, the state's reserve account is expected to be empty by July 2004.

Many lawmakers see closing the state's ''fiscal gap'' as one of the biggest problems facing the state.

A bipartisan caucus of lawmakers -- mostly made up of House members -- formulated a plan to close the gap through a mix of taxes and spending limits.

The plan would impose a 3 percent income tax and a 2 percent sales tax, raise taxes on alcohol and gasoline, impose a $25 per passenger tax on cruise ships and raise oil and gas taxes $100 million.

It would also cap Permanent Fund dividend checks to $1,250 and limit the growth of state services to 2 percent each year, no matter the inflation factor or increase in population.

No one in the caucus backed the entire plan and Rep. Drew Scalzi, R-Homer, had said it was only a framework for discussion when lawmakers reconvene.

Senate Finance Co-chairman Dave Donley, R-Anchorage, said closing the state's fiscal gap will be an incremental process. Donley said curbing government spending is the first step lawmakers should take to muster public support for any new taxes.

A measure sponsored by Donley, Halford and other Senate Republican leaders would cap state spending to 2 percent of the previous year's budget.

Donley's fiscal package includes seven bills that would not make up the shortfall in state spending. But he points to a 1999 advisory question on whether to spend Permanent Fund earnings on state government that voters rejected by 83 percent.

''First we need to show (residents) we are doing everything we can to be fiscally responsible,'' Donley said.

Gov. Tony Knowles' budget, unveiled in December, proposes $179.9 million in additional state spending, including sharp increases in social service, education and anti-terrorism measures.

Knowles, a Democrat, is in the last year of his second term as governor and cannot run for a third consecutive term. Knowles is expected to unveil a plan to pay for the increases in state spending when lawmakers return.

A Knowles aide said the plan will include specific proposals to address the state's fiscal picture.

But pundit's don't hold much confidence in any substantive changes in the state's financial straits.

''It's an election year coming up and people just don't believe that they need to do this,'' said Clive Thomas, political science professor at the University of Alaska Southeast. ''It's a great session for finger pointing.''

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